Why HDFC Bank Stock Fell Today: Analysis and Forecast

Synopsis: HDFC Bank's stock fell over 4% following a subdued quarterly update, erasing Rs53,000 crore in market cap. Analysts cited lower-than-expected growth in loans and deposits. Nomura downgraded the stock to 'Neutral,' reflecting cautious market sentiment amid ongoing financial adjustments post-merger with HDFC.

HDFC Bank, India's third most-valued stock, experienced a significant decline of over 4% on Friday, wiping out approximately Rs53,000 crore from its market capitalization. This drop followed the bank's business update for the June quarter, which revealed softer-than-expected growth in loans and deposits.

Quarterly Performance

Nomura India highlighted that HDFC Bank's loan and deposit growth for the June quarter are typically modest due to seasonal factors. However, this year's figures were slightly below the usual range. The bank reported an 11% year-on-year growth in gross assets under management (AUM) on a pro-forma basis, with net loans declining by 0.8% sequentially. Deposits grew by 15.3% year-on-year but remained flat sequentially, with the CASA ratio dropping by 190 basis points to 36%.

Market Reaction

Following these updates, HDFC Bank's stock fell to a low of Rs1,654.25 on the BSE. Analysts have mixed views on the bank's future performance. Nomura has downgraded the stock to 'Neutral' with a target price of Rs1,660, citing that the bank's growth rates are tracking below their fiscal 2025 forecasts. They do not foresee significant outperformance compared to other private banks at current valuations.

Broader Implications

This decline in stock price reflects broader concerns about HDFC Bank's financial health post its merger with Housing Development Finance Corp (HDFC). Analysts are cautious about the bank's near-term performance, particularly its net interest margin (NIM) and asset quality. While some brokerages maintain a positive long-term outlook, the consensus suggests careful monitoring of the bank's growth trajectory and financial adjustments post-merger.

Disclaimer: The above analysis is based on publicly available information and should not be construed as financial advice. Investors should consult with certified financial advisors before making investment decisions.